DOCSLIB.ORG

Neo-Classical Economics: a Trail of Economic Destruction Since the 1970S Erik S

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Neo-Classical Economics: a Trail of Economic Destruction Since the 1970S Erik S real-world economics review, issue no. 60 Neo-classical economics: A trail of economic destruction since the 1970s Erik S. Reinert [The Other Canon Foundation, Norway] Copyright: Erik S. Reinert, 2012 You may post comments on this paper at http://rwer.wordpress.com/2012/06/20/rwer-issue-60/ ‘...soon or late, it is ideas, not vested interests, which are dangerous for good or evil’. John Maynard Keynes, closing words of The General Theory (1936). Abstract This paper argues that the international financial crisis is just the last in a series of economic calamities produced by a type of theory that converted the economics profession from a study of real world phenomena into what in the end became mathematized ideology. While the crises themselves started by halving real wages in many countries in the economic periphery, in Latin America in the late 1970s, their origins are found in economic theory in the 1950s when empirical reality became academically unfashionable. About half way in the destructive path of this theoretical tsunami – from its origins in the world periphery in the 1970s until today’s financial meltdowns – we find the destruction of the productive capacity of the Second World, the former Soviet Union. Now the chickens are coming home to roost: wealth and welfare destruction is increasingly hitting the First World itself: Europe and the United States. This paper argues that it is necessary to see these developments as one continuous process over more than three decades of applying neoclassical economics and neo-liberal economic policies that destroyed, rather than created, real wages and wealth. A reconstruction of widespread welfare will need to be based on the understanding that what unleashed the juggernaut of welfare destruction was not ‘market failure’; it was ‘theory failure’. Being a résumé of a larger research project, the paper includes references to more detailed studies of these processes of ‘destructive destruction’. Contents 1. Introduction: A Trail of Economic Destruction. 2. The Problem: Unlearning the Activity-Specific Element of Economic Growth and Welfare. 3. From the Mid-1970s: The Washington Institutions Chasing and Destroying ‘Rents’ in the Productive Sector only to Re-create them in the Financial Sector. 4. The Resurrection as Post-Industrial Feudalism? 5. The Solution: Back to Basics, Resurrecting the Alternative Canon. Introduction Two institutions established soon after WW II provided the conditions for a thirty year period of unprecedented increase in human welfare: The 1947 Marshall Plan, in the end re- industrializing not only Europe but creating a cordon sanitaire of wealthy nations around the communist block from Norway via Southern Europe to Japan, and the 1948 Havana Charter which established the rules of international trade that made this industrialization plan possible. Both institutions were based on a key insight from Secretary of State George Marshall’s 1947 Harvard Speech announcing his plan: that civilization had always been built on a particular type of economic structure. ‘The farmer has always produced the foodstuffs to exchange with the city dweller for the other necessities of life. This division of labor is the basis of modern 1 civilization. At the present time it is threatened with breakdown.’ 1 http://www.oecd.org/document/10/0,3746,en_2649_201185_1876938_1_1_1_1,00.html (italics added). Marshall’s insight still holds. An important common element in the approximately 50 failed or failing 2 real-world economics review, issue no. 60 Industrialization became the marching order, and the Havana Charter organized world trade accordingly: as long as there was either an industrial plan or unemployment was present in a country it was possible to protect what the great liberal John Stuart Mill had promoted as ‘infant industry protection’. Starting at the same time, this vision of industrialization formed the very core of classical development economics.2 At the same time, wise legislation following the 1929 financial crash had harnessed finance as the servant of production, and already in 1945 Roosevelt’s advisor on science, Vannevar Bush, had given the West the task of pushing forward the ‘never ending frontier of scientific knowledge’ through continuous innovations.3 With a tripartite political setting – a balance of countervailing powers – between big business, big labor, and big government, all pieces were in place for the formidable increased welfare and economic growth that followed over the next decades. The vision that solidified in 1947 was not new, however, and not unique to the West. When Russian intellectuals some years after the 1917 revolution started analyzing communist economic policy, they found that it was essentially the same industrialization policy that had been followed under Sergei Witte, Minister of Finance under the last two tsars, but under a very different political regime. It is easily forgotten that during the 20th century this type of vision was shared along the whole political axis. Henry Ford’s United States, Hitler, Stalin, and Western European Welfare States all had a common understanding of wealth creation in industrialization and mass production and – parallel – an understanding of the necessarily subservient status of the financial sector to that of production. The 1947 vision was implicitly based on German economist Werner Sombart’s definition of capitalism as a system of production containing three main elements: a) the entrepreneur, b) the modern state, and c) the technological system, i.e. Vannevar Bush’ never ending frontier of scientific knowledge. These three main elements of successful capitalism were, however, extremely difficult to formalize, and gradually they all disappeared from economic theory. The new typical definition of capitalism became that of a system of private ownership where all coordination outside the firm is determined by the market. As Sombart’s three elements disappeared from neoclassical economics, so did the qualitative understanding of economic growth and development. Economics came to be based on what Schumpeter called ‘the pedestrian view that it is the accumulation of capital per se that propels the capitalist engine’. This, and the disappearance of Schumpeter’s distinction between the monetary sphere (‘the accounting units’) and the real economy, opened the way for the present dominance of the financial sector over the productive sector. The 1947 type of understanding had a very long history in Europe. American economic historian Richard Goldthwaite shows the historical importance of the dichotomy between raw materials and manufacturing in a recent book: what is generally seen as Europe’s ‘commercial revolution’, Goldthwaite argues, was in fact a process of emulating other countries, one of import substitution: manufactured goods, that had previously been imported states today is that the manufacturing industry contributes less than six per cent of GDP (see Reinert, Kattel & Amaïzo quoted below. 2 For a discussion, see Kattel, Rainer, Jan Kregel and Erik S. Reinert. Ragnar Nurkse (1907-2007): Classical Development Economics and its Relevance for Today. London: Anthem Other Canon Series, 2009. 3 http://www.nsf.gov/od/lpa/nsf50/vbush1945.htm#transmittal 3 real-world economics review, issue no. 60 from the Levant started to be produced in Europe from the 12th century onwards. 4 A recent book documents that this process of emulation – rather than of comparative advantage – was the main strategy also of Enlightenment Europe.5 Figure 1: Comparing economic development in Somalia and Korea Source: Reinert, Amaïzo and Kattel, 2009.6 The wealth and poverty of nations are still determined by the dichotomy between raw materials on the one hand and manufacturing and advanced services on the other. Figure 1 illustrates the explosive growth of South Korea, starting only in the very late 1960s, as that nation diversified its economy away from agriculture and raw materials and into manufacturing industry. Through very heavy-handed industrial policy, Korea broke away from its ‘comparative advantage’ in agriculture. By comparison, Somalia – being richer that Korea until the mid-1960s – did not, and instead continued to specialize according to its comparative advantage in being poor. Understanding this extremely important distinction – between raw materials subject to diminishing returns, monoculture, and perfect competition on the one hand, and manufactured goods and advanced services subject to increasing returns, dynamic imperfect competition, and a large division of labor on the other – was the economic basis for Stalinism, for the Marshall Plan and Keynesian social democracy in Western Europe following World War II, and for US capitalism. The trail of economic destruction that has sequentially hit the world 4 Goldthwaite, Richard (2009). The Economy of Renaissance Florence. Baltimore: Johns Hopkins University Press, pp. 6-8. 5 Reinert, Sophus, Translating Empire, Emulation and the Origins of Political Economy, Cambridge, MA, Harvard University Press, 2011. 6 Reinert, Erik S., Yves Ekoué Amaïzo and Rainer Kattel ‘The Economics of Failed, Failing and Fragile States: Productive Structure as the Missing Link’, in Kahn, Shahrukh Rafi & Jens Christiansen Towards New Developmentalism: Market as Means Rather Than Master, London: Routledge, 2010, pp. 59-86. WP version http://tg.deca.ee/eng/working_papers/ 4 real-world economics review, issue no. 60 since the mid-1970s is largely the result of neo-classical economic theory
Load more

Recommended publications
  • Nber Working Paper Series Financial Markets and The
    NBER WORKING PAPER SERIES FINANCIAL MARKETS AND THE REAL ECONOMY John H. Cochrane Working Paper 11193 http://www.nber.org/papers/w11193 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 March 2005 This review will introduce a volume by the same title in the Edward Elgar series “The International Library of Critical Writings in Financial Economics” edited by Richard Roll. I encourage comments. Please write promptly so I can include your comments in the final version. I gratefully acknowledge research support from the NSF in a grant administered by the NBER and from the CRSP. I thank Monika Piazzesi and Motohiro Yogo for comments. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research. © 2005 by John H. Cochrane. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. Financial Markets and the Real Economy John H. Cochrane NBER Working Paper No. 11193 March 2005, Revised September 2006 JEL No. G1, E3 ABSTRACT I survey work on the intersection between macroeconomics and finance. The challenge is to find the right measure of "bad times," rises in the marginal value of wealth, so that we can understand high average returns or low prices as compensation for assets' tendency to pay off poorly in "bad times." I survey the literature, covering the time-series and cross-sectional facts, the equity premium, consumption-based models, general equilibrium models, and labor income/idiosyncratic risk approaches.
    [Show full text]
  • Nominal Rigidity and Some New Evidence on the New Keynesian Theory of the Output-Inflation Tradeoff Rongrong Sun1
    Munich Personal RePEc Archive Nominal Rigidity and Some New Evidence on the New Keynesian Theory of the Output-Inflation Tradeoff Sun, Rongrong University of Wuppertal 2012 Online at https://mpra.ub.uni-muenchen.de/45021/ MPRA Paper No. 45021, posted 15 Mar 2013 06:19 UTC Nominal Rigidity and Some New Evidence on the New Keynesian Theory of the Output-Inflation Tradeoff Rongrong Sun1 Abstract: This paper develops a series of tests to check whether the New Keynesian nominal rigidity hypothesis on the output-inflation tradeoff withstands new evidence. In so doing, I summarize and evaluate different estimation methods that have been applied in the literature to address this hypothesis. Both cross-country and over-time variations in the output-inflation tradeoff are checked with the tests that differentiate the effects on the tradeoff that are attributable to nominal rigidity (the New Keynesian argument) from those ascribable to variance in nominal growth (the alternative new classical explanation). I find that in line with the New Keynesian hypothesis, nominal rigidity is an important determinant of the tradeoff. Given less rigid prices in high-inflation environments, changes in nominal demand are transmitted to quicker and larger movements in prices and lead to smaller fluctuations in the real economy. The tradeoff between output and inflation is hence smaller. Key words: the output-inflation tradeoff, nominal rigidity, trend inflation, aggregate variability JEL-Classification: E31, E32, E61 1 Schumpeter School of Business and Economics, University of Wuppertal, [email protected]. I would like to thank Katrin Heinrichs, Jan Klingelhöfer, Ronald Schettkat and the seminar (conference) participants at the Schumpeter School of Business and Economics, the DIW Macroeconometric Workshop 2009, the 2011 meeting of the Swiss Society of Economics and Statistics (SSES) and the 26th Annual Congress of European Economic Association (EEA), 2011 Oslo for their helpful comments.
    [Show full text]
  • Three Dimensions of Classical Utilitarian Economic Thought ––Bentham, J.S
    July 2012 Three Dimensions of Classical Utilitarian Economic Thought ––Bentham, J.S. Mill, and Sidgwick–– Daisuke Nakai∗ 1. Utilitarianism in the History of Economic Ideas Utilitarianism is a many-sided conception, in which we can discern various aspects: hedonistic, consequentialistic, aggregation or maximization-oriented, and so forth.1 While we see its impact in several academic fields, such as ethics, economics, and political philosophy, it is often dragged out as a problematic or negative idea. Aside from its essential and imperative nature, one reason might be in the fact that utilitarianism has been only vaguely understood, and has been given different roles, “on the one hand as a theory of personal morality, and on the other as a theory of public choice, or of the criteria applicable to public policy” (Sen and Williams 1982, 1-2). In this context, if we turn our eyes on economics, we can find intimate but subtle connections with utilitarian ideas. In 1938, Samuelson described the formulation of utility analysis in economic theory since Jevons, Menger, and Walras, and the controversies following upon it, as follows: First, there has been a steady tendency toward the removal of moral, utilitarian, welfare connotations from the concept. Secondly, there has been a progressive movement toward the rejection of hedonistic, introspective, psychological elements. These tendencies are evidenced by the names suggested to replace utility and satisfaction––ophélimité, desirability, wantability, etc. (Samuelson 1938) Thus, Samuelson felt the need of “squeezing out of the utility analysis its empirical implications”. In any case, it is somewhat unusual for economists to regard themselves as utilitarians, even if their theories are relying on utility analysis.
    [Show full text]
  • Modern Monetary Theory: a Marxist Critique
    Class, Race and Corporate Power Volume 7 Issue 1 Article 1 2019 Modern Monetary Theory: A Marxist Critique Michael Roberts [email protected] Follow this and additional works at: https://digitalcommons.fiu.edu/classracecorporatepower Part of the Economics Commons Recommended Citation Roberts, Michael (2019) "Modern Monetary Theory: A Marxist Critique," Class, Race and Corporate Power: Vol. 7 : Iss. 1 , Article 1. DOI: 10.25148/CRCP.7.1.008316 Available at: https://digitalcommons.fiu.edu/classracecorporatepower/vol7/iss1/1 This work is brought to you for free and open access by the College of Arts, Sciences & Education at FIU Digital Commons. It has been accepted for inclusion in Class, Race and Corporate Power by an authorized administrator of FIU Digital Commons. For more information, please contact [email protected]. Modern Monetary Theory: A Marxist Critique Abstract Compiled from a series of blog posts which can be found at "The Next Recession." Modern monetary theory (MMT) has become flavor of the time among many leftist economic views in recent years. MMT has some traction in the left as it appears to offer theoretical support for policies of fiscal spending funded yb central bank money and running up budget deficits and public debt without earf of crises – and thus backing policies of government spending on infrastructure projects, job creation and industry in direct contrast to neoliberal mainstream policies of austerity and minimal government intervention. Here I will offer my view on the worth of MMT and its policy implications for the labor movement. First, I’ll try and give broad outline to bring out the similarities and difference with Marx’s monetary theory.
    [Show full text]
  • Nber Working Paper Series David Laidler On
    NBER WORKING PAPER SERIES DAVID LAIDLER ON MONETARISM Michael Bordo Anna J. Schwartz Working Paper 12593 http://www.nber.org/papers/w12593 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 October 2006 This paper has been prepared for the Festschrift in Honor of David Laidler, University of Western Ontario, August 18-20, 2006. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research. © 2006 by Michael Bordo and Anna J. Schwartz. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. David Laidler on Monetarism Michael Bordo and Anna J. Schwartz NBER Working Paper No. 12593 October 2006 JEL No. E00,E50 ABSTRACT David Laidler has been a major player in the development of the monetarist tradition. As the monetarist approach lost influence on policy makers he kept defending the importance of many of its principles. In this paper we survey and assess the impact on monetary economics of Laidler's work on the demand for money and the quantity theory of money; the transmission mechanism on the link between money and nominal income; the Phillips Curve; the monetary approach to the balance of payments; and monetary policy. Michael Bordo Faculty of Economics Cambridge University Austin Robinson Building Siegwick Avenue Cambridge ENGLAND CD3, 9DD and NBER [email protected] Anna J. Schwartz NBER 365 Fifth Ave, 5th Floor New York, NY 10016-4309 and NBER [email protected] 1.
    [Show full text]
  • The Applied-Ethical Structural Synthesis of International Development 1
    Problemas del desarrollo ISSN: 0301-7036 Universidad Nacional Autónoma de México, Instituto de Investigaciones Económicas The Applied-Ethical Structural Synthesis of International Development 1 Astroulakis, Nikos 1 The Applied-Ethical Structural Synthesis of International Development Problemas del desarrollo, vol. 50, no. 197, 2019 Universidad Nacional Autónoma de México, Instituto de Investigaciones Económicas Available in: http://www.redalyc.org/articulo.oa?id=11860882004 DOI: 10.22201/iiec.20078951e.2019.197.65856 PDF generated from XML JATS4R by Redalyc Project academic non-profit, developed under the open access initiative Artícles e Applied-Ethical Structural Synthesis of International Development 1 La síntesis estructural ética-aplicada del desarrollo internacional Nikos Astroulakis b [email protected] Hellenic Open University, Greece Abstract: e paper challenges the mainstream stance in the study of applied ethics in international development. Applied ethics is positioned at the macro-social level of global ethics while a specific codification is attempted by formulating international development based on its structural synthesis, in a threefold level: First, the structural synthesis -associated with the framework of existing international development policy- can be found in the 'market relations'. Second, the analysis specifies the policies applied at the national level and the role of nation-state policy. ird, the paper criticizes the Problemas del desarrollo, vol. 50, no. 197, international development institutions' policies. In each of the levels mentioned above, 2019 the analysis reveals the fundamental policy theory issues of neoclassical economics, as the Universidad Nacional Autónoma de intellectual defender of free market economics. México, Instituto de Investigaciones Key Words: applied ethics, international development, neo-classical economics, Económicas freemarket economy, Nation-State policy, neo-liberal institutionalism.
    [Show full text]
  • “Modern” Economics: Engineering and Ideology
    Working Paper No. 62/01 The formation of “Modern” Economics: Engineering and Ideology Mary Morgan © Mary Morgan Department of Economic History London School of Economics May 2001 Department of Economic History London School of Economics Houghton Street London, WC2A 2AE Tel: +44 (0)20 7955 7081 Fax: +44 (0)20 7955 7730 Additional copies of this working paper are available at a cost of £2.50. Cheques should be made payable to ‘Department of Economic History, LSE’ and sent to the Economic History Department Secretary. LSE, Houghton Street, London WC2A 2AE, UK. 2 The Formation of “Modern” Economics: Engineering and Ideology Mary S. Morgan* Economics has always had two connected faces in its Western tradition. In Adam Smith's eighteenth century, as in John Stuart Mill's nineteenth, these might be described as the science of political economy and the art of economic governance. The former aimed to describe the workings of the economy and reveal its governing laws while the latter was concerned with using that knowledge to fashion economic policy. In the twentieth century these two aspects have more often been contrasted as positive and normative economics. The continuity of these dual interests masks differences in the way that economics has been both constituted and practiced in the twentieth century when these two aspects of economics became integrated in a particular way. Originally a verbally expressed body of scientific law-like doctrines and associated policy arts, in the twentieth century these two wings of economics became conjoined by a set of technologies routinely and widely used within the practice of economics in both its scientific and policy domains.
    [Show full text]
  • A Quantum Theory of Money and Value*
    A quantum theory of money and value* David Orrell [email protected] Abstract The answer to the question ‘what is money?’ has changed throughout history. During the gold standard era, money was seen as gold or silver (the theory known as bullionism). In the early 20th century, the alternative theory known as chartalism proposed that money was a token chosen by the state for payment of taxes. Today, many economists take an agnostic line, and argue that money is best defined in terms of its function, e.g. as a neutral medium of exchange. This paper argues that none of these approaches adequately describe the nature of money, and proposes a new theory, inspired by non-Newtonian physics, which takes into account the dualistic real/virtual properties and complex nature of money. The theory is applied to the example of the emergence of cybercurrencies. Keywords: money, history, cybercurrencies 1. Introduction According to the definition used by most economists, money is anything that serves as a medium of exchange, a store of value, and a unit of account (Ragan & Lipsey, 2011, p. 609). But what special quality is it that gives money these properties? In other words, what makes money, money? Answers to the question are tied up with ideas about value, and have typically fallen into one of three camps. The first, known as metallism or bullionism, holds that the special ingredient is precious metal. Money should ideally be made of the stuff, or at least be backed by it. The second camp is chartalism (from the Latin charta for a record) which holds that coins and other money objects are just tokens, that the state agrees to accept as currency (Knapp, 1924, p.
    [Show full text]
  • Nominality of Money: Theory of Credit Money and Chartalism Atsushi Naito
    Review of Keynesian Studies Vol.2 Atsushi Naito Nominality of Money: Theory of Credit Money and Chartalism Atsushi Naito Abstract This paper focuses on the unit of account function of money that is emphasized by Keynes in his book A Treatise on Money (1930) and recently in post-Keynesian endogenous money theory and modern Chartalism, or in other words Modern Monetary Theory. These theories consider the nominality of money as an important characteristic because the unit of account and the corresponding money as a substance could be anything, and this aspect highlights the nominal nature of money; however, although these theories are closely associated, they are different. The three objectives of this paper are to investigate the nominality of money common to both the theories, examine the relationship and differences between the two theories with a focus on Chartalism, and elucidate the significance and policy implications of Chartalism. Keywords: Chartalism; Credit Money; Nominality of Money; Keynes JEL Classification Number: B22; B52; E42; E52; E62 122 Review of Keynesian Studies Vol.2 Atsushi Naito I. Introduction Recent years have seen the development of Modern Monetary Theory or Chartalism and it now holds a certain prestige in the field. This theory primarily deals with state money or fiat money; however, in Post Keynesian economics, the endogenous money theory and theory of monetary circuit place the stress on bank money or credit money. Although Chartalism and the theory of credit money are clearly opposed to each other, there exists another axis of conflict in the field of monetary theory. According to the textbooks, this axis concerns the functions of money, such as means of exchange, means of account, and store of value.
    [Show full text]
  • Private Debt Booms and the Real Economy: Do the Benefits Outweigh the Costs?
    Private Debt Booms and the Real Economy: Do the Benefits Outweigh the Costs? Emil Vernery Prepared for the INET Initiative on Private Debt August 2019 Abstract Probably not. Economic development coincides with rising private debt-to-GDP. This partly reflects the economic benefits of credit deep- ening, which facilitates a better allocation of savings towards productive investment. However, private debt booms, episodes of rapid expansion in private debt-to-GDP, systemically predict growth slowdowns that re- sult in lower real GDP. Debt booms distort the economy by boosting demand instead of productive capacity and by fueling asset price booms. These booms leave in their wake private debt overhang, banking sec- tor distress, and an overvalued real exchange rate. Private debt booms are thus distinct from credit deepening episodes, and the costs of these booms likely outweigh the benefits. yMassachusetts Institute of Technology, Sloan School of Management; [email protected] thank Holger Mueller, Karsten M¨uller,Moritz Schularick, and Ole Risager for valuable comments and Fanwen Zhu for outstanding research assistance. 1 1 Introduction Private debt booms are episodes of rapid expansion in credit to households and firms. These booms have been playing an increasingly prominent role in economic fluctuations over the past few decades. A rapid expansion in debt can reflect structural improvements in the financial sector's ability to intermediate funds towards productive investment or an acceleration in productivity growth. Thus, private debt booms may part of the road to financial and economic development through the beneficial effects of credit deepening. However, debt booms have also been followed by growth slowdowns and severe financial crises.
    [Show full text]
  • The Spectre of Monetarism
    The Spectre of Monetarism Speech given by Mark Carney Governor of the Bank of England Roscoe Lecture Liverpool John Moores University 5 December 2016 I am grateful to Ben Nelson and Iain de Weymarn for their assistance in preparing these remarks, and to Phil Bunn, Daniel Durling, Alastair Firrell, Jennifer Nemeth, Alice Owen, James Oxley, Claire Chambers, Alice Pugh, Paul Robinson, Carlos Van Hombeeck, and Chris Yeates for background analysis and research. 1 All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx Real incomes falling for a decade. The legacy of a searing financial crisis weighing on confidence and growth. The very nature of work disrupted by a technological revolution. This was the middle of the 19th century. Liverpool was in the midst of a golden age; its Custom House was the national Exchequer’s biggest source of revenue. And Karl Marx was scribbling in the British Library, warning of a spectre haunting Europe, the spectre of communism. We meet today during the first lost decade since the 1860s. In the wake of a global financial crisis. And in the midst of a technological revolution that is once again changing the nature of work. Substitute Northern Rock for Overend Gurney; Uber and machine learning for the Spinning Jenny and the steam engine; and Twitter for the telegraph; and you have dynamics that echo those of 150 years ago. Then the villains were the capitalists. Should they today be the central bankers? Are their flights of fancy promoting stagnation and inequality? Does the spectre of monetarism haunt our economies?i These are serious charges, based on real anxieties.
    [Show full text]
  • The Rise of Money and Class Society: the Contributions of John F
    Working Paper No. 832 The Rise of Money and Class Society: The Contributions of John F. Henry by Alla Semenova* State University of New York, Potsdam L. Randall Wray† Levy Economics Institute of Bard College February 2015 * [email protected] † [email protected] The Levy Economics Institute Working Paper Collection presents research in progress by Levy Institute scholars and conference participants. The purpose of the series is to disseminate ideas to and elicit comments from academics and professionals. Levy Economics Institute of Bard College, founded in 1986, is a nonprofit, nonpartisan, independently funded research organization devoted to public service. Through scholarship and economic research it generates viable, effective public policy responses to important economic problems that profoundly affect the quality of life in the United States and abroad. Levy Economics Institute P.O. Box 5000 Annandale-on-Hudson, NY 12504-5000 http://www.levyinstitute.org Copyright © Levy Economics Institute 2015 All rights reserved Abstract This paper explores the rise of money and class society in ancient Greece, drawing historical and theoretical parallels to the case of ancient Egypt. In doing so, the paper examines the historical applicability of the chartalist and metallist theories of money. It will be shown that the origins and the evolution of money were closely intertwined with the rise and consolidation of class society and inequality. Money, class society, and inequality came into being simultaneously, so it seems, mutually reinforcing the development of one another. Rather than a medium of exchange in commerce, money emerged as an “egalitarian token” at the time when the substance of social relations was undergoing a fundamental transformation from egalitarian to class societies.
    [Show full text]